Plant's budget busted - Duke now seeking larger rate hike

Duke Energy's coal gasification power plant under construction near Edwardsport, Ind., in Knox County, will cost $365 million more than previously expected.

And that increase will possibly hike electric rates for Duke customers by 2 percent, according to the company.

The effect of constructing the plant on rates paid by Duke customers is now expected to be an 18 percent increase to be phased in between now and 2013, Duke Energy Indiana President Jim Stanley said. But the additional construction costs must first be approved by state regulators.

The company filed a progress report with the Indiana Utility Regulatory Commission on Thursday, raising the expected cost for the plant, located about 60 miles north of Evansville, to $2.35 billion.

However, that increase would not include the additional cost of studying the capture and storage of carbon dioxide from the plant. Duke is separately seeking state approval of its plans for the carbon capture study and to recover those study costs through ratepayers, said Angeline Protogere, a Duke spokeswoman.

"They want to take the ratepayers up through the point of bankruptcy," said John Blair, of Evansville-based group Valley Watch. "They are not wanting to assume any risk of this plant whatsoever, is the bottom line. It's unfortunate for the ratepayers in Indiana."

Duke is the largest electricity supplier in Indiana, serving more than 780,000 customers. It also operates the Gibson Generating Station near Princeton, Ind.

As a condition of the commission's November 2007 approval of Duke's rate increase for the Edwardsport plant, the company agreed to study the possibility of capturing 18 percent of its carbon dioxide emissions. The carbon dioxide would be stored by injecting it into the ground at the plant site or using it to recover oil. Carbon dioxide is one of several "greenhouse" gases linked to climate change.

The new plant will produce 10 times as much power as the existing plant and will emit less carbon dioxide, sulfur dioxide, nitrogen oxide and mercury, Stanley said.

But the plant would still put out an estimated 4.3 million tons of carbon dioxide per year, making it a target for criticism from some environmental and public interest groups, even while other groups see the power plant's "clean coal" technology as beneficial.

The power plant would operate by converting coal to synthetic gas which is then burned to create electricity. Traditional power plants burn coal directly.

"It is our goal to make this one of the first demonstrations of carbon capture and geologic sequestration of power plant (carbon dioxide) emissions in the nation," Protogere said.

But Blair said the amount of carbon dioxide Duke would capture at the plant is not enough to make a difference.

"It's so phenomenally meager that it doesn't get the job done. It's almost a joke," he said.

Duke officials cited the rising cost of building power plants in the last year for the cost increase of the Edwardsport plant.

"While we're not seeing as big an increase as some projects, the same pressures are driving up the costs of contracts from our major vendors. We're now in competition with developing nations such as China and India for materials, and we are seeing increased labor costs to build power plants," said James L. Turner, president of Duke Energy U.S. Franchised Electric and Gas.

The 630-megawatt plant along the White River will replace a 160-megawatt coal-fired plant that Duke now operates there. It is scheduled to be completed in 2012.

"When it's completed, this will be one of the cleanest, most efficient coal-fired plants in the world," Stanley said. "If we didn't pursue this project, our primary alternative would be to rely on natural gas. Natural gas is more costly than coal, and gas prices and supplies are volatile and unpredictable."

The company is to receive more than $460 million in local, state and federal tax incentives, which will help reduce the expected total rate increase, Stanley said.